The resource limit that Medicaid imposes to qualify for benefits can really put people in a bind. They know they may need Medicaid in the future but they do not want to spend down money or sell off property in order to qualify for it. This problem is why some families planning for Medicaid consider using a Medicaid trust.
You probably have heard of trusts before. People create them to hold assets for beneficiaries like children or other relatives. Trusts are useful because they help avoid probate. As Policy Genius explains, a certain kind of trust called a Medicaid trust may help you if you seek to qualify for Medicaid.
How a Medicaid trust works
Many trusts are revocable trusts. A person who creates one, known as a grantor, retains power to change the terms of the trust. However, the government still considers assets owned in a revocable trust to be the property of the grantor. This means that you could not use a revocable trust to reduce your resources to qualify for Medicaid since the government would still consider your trust assets to be your property.
A Medicaid trust, however, is irrevocable. Once you set one up, you cannot alter it afterward. Since you give up control over the assets in the trust, the government will not consider it your property any longer. This may help decrease your resources below the limit required for Medicaid coverage.
Assets that go into a Medicaid trust
Certain assets such as your car, your retirement account or your primary residence do not count towards your resource threshold, so there should be no need to place these assets into your Medicaid trust. However, an asset like your checking account, CDs, stocks or real estate that is not your primary home may count against you for coverage. These are the kinds of assets you would likely have to put into your Medicaid trust in order to qualify for the Medicaid resource limit.
The Medicaid trust and the look-back period
Keep in mind that a Medicaid trust is also subject to the Medicaid look-back period. If you transfer your assets within the look-back period of Colorado, you will not receive Medicaid coverage. However it is possible to prorate a look-back period. If you were to enter a nursing home a year before become eligible for Medicaid, you could simply pay for the home for that year yourself and start receiving Medicaid coverage afterward.